Why is vertex snapping with auto merge enabled not merging vertices?
The video is of 2.62, where this seems to work. In current versions of blender you need to disable Applied edit cage on your modifiers for snapping + auto-merge to work reliably:

I've reported this here.

However, in this case there are some potentially faster ways to merge these loops.
Loops with equal vertex count, but not necessarily even vertex placement:

Select both loops and press W&gt; Bridge Edge loops (E)

Switch to edge select mode (CtrlTab&gt; Edge) and select the newly created edge ring by pressing CtrlAltRMB over one of the new edges.

Press AltM&gt; Collapse to collapse the selected edges.



Loops with lined up vertices, but not necessarily the same vertex count:

Press W&gt; Remove doubles and up the merge distance in the redo panel (F6). This will result in triangles with uneven vertex counts, and it could produce tris even with equal vertex counts.